British stocks slump in worst day since 2020 as US-China trade war intensifies

By Sanchayaita Roy

(Reuters) -British stocks plunged on Friday as investors avoided risky assets after China's retaliatory tariffs against the United States heightened worries of a global recession.

The blue-chip FTSE 100 index touched a more than three-month low, down nearly 5% - its largest daily drop since March 2020, when world markets slumped due to COVID-19.

The midcap index slipped 4.4%, closing at a 16-month low.

Both the blue chip and midcap indexes saw their biggest weekly declines in five years as investors sold equities and rushed for safe havens such as government bonds.

China, which is currently facing 54% tariffs on exports to the U.S., retaliated with additional tariffs of 34% on all U.S. goods from April 10, intensifying a trade war between the two major global economies.

Federal Reserve Chair Jerome Powell said, Trump's new tariffs are "larger than expected" and the economic fallout including higher inflation and slower growth likely will be as well, in remarks that pointed to the potentially difficult set of decisions ahead for the central bank.

Britain faced the lowest import duty rate of 10% in President Donald Trump's Wednesday's tariff announcement, although officials acknowledged the country's vulnerability to global economic headwinds.

British Prime Minister Keir Starmer will speak to other world leaders over the weekend on the shifting "global economic landscape".

All stocks in the FTSE 100, barring JD Sports Fashion, lost ground on the day.

Aerospace and defence led sectoral declines, down 9%.

Banking stocks slipped as investors fretted about growth in the world's largest economy and priced in far more central bank rate cuts amid tariff concerns, with the banking sector down 6.3% to a three-month low.

The index of precious and industrial metal miners dropped 8.5% and 7.5%, respectively. Gold prices fell nearly 2% as traders liquidated their bullion positions following wider market sell-offs. [GOL/]

Base metals also fell, with copper on track for its biggest daily slide since the early days of the 2020 COVID-19 pandemic. [MET/L]

Oil and Gas stocks fell 7.1% as oil prices plunged nearly 8%. [O/R]

Heavyweight Shell was the biggest drag on the FTSE 100, down nearly 7%.

BP declined 7.4% after an announcement that Chair Helge Lund intends to step down "likely during 2026," amid a campaign by activist hedge fund Elliott for more change at the oil major.

On the data front, U.S. Labor Department reported a higher-than-expected job increase in March, but Trump's tariffs may weaken the labor market as business confidence drops.

Britain's construction industry shrank sharply last month, with civil engineering declining at the fastest rate since 2020.

(Reporting by Ragini Mathur and Sanchayaita Roy in Bengaluru; Editing by Shilpi Majumdar and Andrew Heavens)